Created: Saturday, 11 October 2014 11:30
MCX Gold futures headed for its biggest weekly advance since Aug-2014 as slump in equities and growing worries over the global economy attracted safe-haven bids for the metal. Central bank (RBI) keeping the repo and reverse repo rates unchanged at 8 percent and 7 percent respectively acted as a negative factor for the Indian Rupee which further supported positive sentiments in gold. Widening of the Current Account Deficit (CAD) and uplift of coal ban by the Supreme Court increased worries for the rise in CAD in future. Instead of weekly gain, gold prices seen to pressurized on international cues as Dollar Index that measures dollar movements against a basket of six currencies traded on a positive note on the back of expectations that US Federal Reserve will round up its QE tapering program in its meeting scheduled on 28-29 October 2014.
Global commodity prices are falling, the main reason stated around the globe for this continuing dull run in commodities is the slowing demand for crude oil, agricultural products, metals and bullion from the world’s largest consumer China. Crash in the prices of hot commodities like gold, copper, iron ore, coal and crude oil is a sure sign and reflection that the US dollar is getting strengthened on the back of a recovering global economy. The impact of falling commodity prices on countries differs as per economic dependencies. As these key natural resources have been difficult to source on their high prices earlier for Indian companies; now that their prices are down, Indian companies are stepping up their manufacturing activities.
COMEX Gold headed for the biggest weekly gain since Jun-2014 and last week traded above its major support level of $1180. Gold as an asset class is losing its significance as a part of investors portfolio and this is the reason for investors to dump the yellow metal and invest in risky assets like equities. Gold is also on track to post its first quarterly loss of the year, though it is still up about 1 percent for the year. The dollar index has been the driving factor for the decline in gold prices in the recent weeks. The index gained around 3.54 percent last month and traded at its highest point in the last four years. The expectations of monetary tightening by the Fed in turn created optimism and exerted downside pressure on prices. Holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded product, said its holdings fell by 5.39 tonnes to 762.08 tonnes on Thursday on weekly basis, the least since December 2008.
Silver along with gold declining on speculative interest and declined around 10 percent in Sept-14. In the Indian markets, Silver prices lost its value around 7 percent taking cues from weakness in the international market. The CFTC (U.S. Commodities Future Trading Commission) positioning in Silver indicates that money managers have been reducing their exposure in Silver for last 6 weeks. Net shorts as on 30th Sept-14 stood at 6073 contracts when compared to net longs of 13718 contracts as on 26th Aug-14, exerting downside pressure on prices.
Last week, MCX gold tracked international trends and witnessed up-trend. It opened on weak note but it did not sustain below the level of 26500 & showed bullish trend for the entire week and test the level of 27000 on the higher side. Overall, Gold is still looking weak on the charts and this week, MCX gold Dec can again move downward and can test the level of 26500. Similarly, last week MCX Silver remained sideways to positive but could not sustain above the level of 39000. MCX Silver is also looking weak on charts and this week MCX Silver Dec can move downward and can test the levels of 37800 – 37500.
For this week, major U.S. Data like Core retail sales, PPI, Unemployment change, Building permits and Consumer Sentiment coupled with physical demand in Asian region will further provide direction to the bullion.
Created: Wednesday, 08 October 2014 11:10
Market which Opened after a 5 days hiatus, opened on a Flat Note and went down hill, selling pressure on the market because of Poor Industrial Production Data From Germany which signaled a weak European Economy in trouble, as Germany has been the main stay for the economy still not fully recovered from Euro-Zone Crisis. This was the worst Performance of German Manufacturing Post Financial Crisis.
The Wall Street which was on a high after a touching a high of 2 Months, also nursed loses worries about slowing global growth impacted nerves of Investors as they invested in safe Haven US Bonds. The Next US Event which will be of Significance to Indian Markets will be Minutes of the Federal Reserve Policy Meet expected to be released soon, which will Impact Global Markets.
The IMF reduced the Projected Global Growth rate from 3.4% to 3.3% which is on the back of Euro-Crisis Fear of still being far from over, also a decline in growth of Brazil which is at 1%, which in some way could benefit India, as Other Countries of BRIC Group struggle, with Russia facing ire of US on Ukraine Crisis, China Growth Seemingly Slowing Down, India Offer a safe heaven, with Stable Government and Big Market. Chinese Market will be closed till 8th Oct.
Commodity Outlook: MCX Gold December Futures will also be under selling Pressure, with support levels of 26,200/25,900 level acting as big support and 27,100/27,500 resistance levels. MCX Silver December Futures is also looking bearish with 40,000/41,800 acting as big resistance, and 35,800/34,500 as big support. Crude is also back in demand with resurgent American Economy. Copper Futures is also at its five months low trading at 3 dollars for a pound this could be attributed to European Markets. The Base Metals are expected to trade with a negative Bias because of Supply Constraints, and Strong Dollars Keeping Them in Check.
Equity Markets: The Indian Equity Markets have been facing correction of late from Weak Global cues, with Market Expected to trade between 7700 and 8300, with support levels of 8,000 and 7,900. The Internal Factors which will Impact the Market in a major Way, will be Industrial Production(IIP) data to be released on 10th October, the second quarter earnings of Companies like Infosys will also be released on same day.
The Activity in Market will be stock specific, as no Major Sectoral News is Expected to Move Markets, Markets will be Range Bound and should show flat movement throughout trading Today.